<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QA
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 1995
Commission File Number 0-12516
Dynamic Healthcare Technologies, Inc.
(Exact name of registrant as specified in its charter)
Nebraska 47-0643468
(State of Incorporation) (IRS E.I.N.)
101 Southhall Lane, Suite 210, Maitland, Florida 32751
(Address of principal executive offices) (Zip Code)
(407)875-9991
(Registrant's telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or (15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by checkmark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13, or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a Court.
Yes No
As of July 31, 1995, there were 6,589,071 shares outstanding, par
value $.01 per share, of the issuer's only class of common stock.
This report consists of (16) sixteen pages.
The index to exhibits appears on page (15) fifteen.
1
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
See attached statements following this item number.
2<PAGE>
<PAGE>
<TABLE>
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
Condensed Balance Sheets
<CAPTION>
June 30 December 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 235,880 $ 10,173
Accounts receivable, net of
allowance for doubtful accounts
of $121,924 at June 30, 1995,
and $250,000 at December 31,
1994 1,657,881 2,166,813
Unbilled receivables 599,012 528,372
Other current assets 124,861 199,651
Total current assets 2,617,634 2,905,009
Property, equipment and leasehold
improvements, net of accumulated
depreciation of $1,915,050 at
June 30, 1995, and $1,939,978
at December 31, 1994 1,167,944 1,212,969
Capitalized software development
costs, net of accumulated amorti-
zation of $1,543,766 at June 30,
1995, and $1,273,095 at December
31, 1994 1,998,368 1,821,917
Goodwill, net of accumulated
amortization of $132,133 at June
30, 1995, and $54,787 at December
31, 1994 950,704 1,028,050
Other assets 29,058 32,171
$6,763,708 $7,000,116
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Borrowings under line of credit $3,400,000 $2,788,401
Accounts payable and accrued
expenses 1,237,890 1,182,450
Deferred revenue 1,035,110 1,452,895
Subordinated convertible
notes payable 350,000 --
Advanced billings 246,353 351,835
Total current liabilities 6,269,353 5,775,581
Long-term debt 77,010 722,569
Total liabilities 6,346,363 6,498,150
Common stock, $0.01 par value;
authorized 20,000,000 shares,
issued and outstanding 6,589,071
shares at June 30, 1995, and
5,967,815 shares at December 31,
1994 65,891 59,678
Additional paid-in capital 9,493,901 8,879,296
Deficit (9,142,447) (8,437,008)
Total shareholders' equity 417,345 501,966
$6,763,708 $7,000,116
</TABLE>
See notes to condensed financial statements
3
<PAGE>
<TABLE>
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
Condensed Statements of Operations
(Unaudited)
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Operating revenues
Computer system
equipment sales
and support $ 354,409 $ 329,458 $ 742,442 $1,244,508
Application
software licenses 707,917 436,240 1,546,902 1,174,554
Software support
and maintenance 1,204,974 635,313 2,212,146 1,236,119
Total operating
revenues 2,267,300 1,401,011 4,501,490 3,655,181
Operating expenses
Cost of equipment
sold 293,131 276,655 658,939 989,355
Client services
expense 640,694 471,549 1,364,883 933,852
Software development
costs 437,732 435,710 915,123 851,762
Sales and marketing
costs 540,459 508,818 1,117,632 935,130
Joint marketing
costs -- -- -- 22,487
General and
administrative
expense 491,762 381,887 947,682 794,401
Total operating
expenses 2,403,778 2,074,619 5,004,259 4,526,987
Operating income
(loss) (136,478) (673,608) (502,769) (871,806)
Other income
(expense)
Interest expense
and financing
costs (88,848) (17,046) (167,623) (22,607)
Loss on sale of
fixed assets (62,283) -- (62,283) --
Miscellaneous 25,207 -- 27,236 --
Total other
income
(expense) (125,924) (17,046) (202,670) (22,607)
Net earnings (loss)
before income taxes (262,402) (690,654) (705,439) (894,413)
Income taxes -
current -- -- -- --
Net earnings
(loss) $ (262,402) $(690,654) $ (705,439) $(894,413)
Net earnings (loss)
per share $ (.04) $ (.13) $ (.11) $ (.17)
Weighted average
number of common
and equivalent
shares outstanding 6,582,883 5,304,524 6,294,977 5,298,231
See notes to condensed financial statements.
4
</TABLE>
<PAGE>
<TABLE>
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
Condensed Statements of Cash Flows
<CAPTION>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (705,439) $ (894,413)
Adjustment to reconcile net
earnings (loss) to net cash
provided by operating
activities:
Depreciation and amortization 536,805 405,774
Book value of property
disposed of 88,929 --
Changes in assets and liabilities:
Accounts receivable 508,932 (732,476)
Unbilled receivable (70,640) 865,685
Other current assets 74,790 (168,257)
Accounts payable and
accrued expenses 55,440 (394,389)
Deferred revenues (417,785) (480,381)
Advance billings (105,482) 126,724
Other assets 3,113 46,391
Total adjustments 674,102 (330,929)
Net cash provided (used)
by operating activities (31,337) (1,225,342)
Cash flows from investing activities:
Capitalized software
development costs (447,121) (174,870)
Purchases of property
and equipment (232,693) (142,794)
Net cash used in
investing activities (679,814) (317,664)
Cash flows from financing activities:
Proceeds from line
of credit 611,599 604,000
Proceeds from
subordinated convertible
notes payable 350,000 --
Repayment of long term debt (35,559) --
Proceeds from incentive
stock option exercises 10,818 84,165
Net cash flows provided
by financing activities 936,858 688,165
Net increase (decrease) in
cash and cash equivalents 225,707 (854,841)
Cash and cash equivalents,
beginning of period 10,173 1,100,142
Cash and cash equivalents,
end of period $ 235,880 $ 245,301
See notes to condensed financial statements.
5
</TABLE>
<PAGE>
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
(A) Unaudited Financial Statements:
The accompanying unaudited Condensed Balance Sheet as of June 30,
1995, Condensed Statements of Operations for the three and six
month periods ended June 30, 1995 and 1994, and Condensed
Statements of Cash Flows for the six month periods ended June 30,
1995 and 1994, have been prepared by management in conformity
with generally accepted accounting principles for interim
financial statements and with instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all the
disclosures required by generally accepted accounting principles
for complete financial statements. All adjustments and accruals
considered necessary for fair presentation of financial
information have been included in the opinion of management.
Operating results for the three and six month period ended June
30, 1995, are not necessarily indicative of the operating results
which may be expected for the year ending December 31, 1995.
(B) Reporting Entity:
On January 1, 1995 the Company's wholly owned subsidiary Dynamic
Healthcare Technologies, Inc. was merged with and into the
Company. The Company then on June 13, 1995 formally adopted
Dynamic Healthcare Technologies, Inc. as its name.
(C) Reclassification:
Certain reclassifications have been made to the 1994 financial
statements to conform to classifications used in 1995.
(D) Subordinated Convertible Notes Payable:
As of June 30, 1995 the Company issued $350,000 of Subordinated
Convertible Notes Payable (the "Notes"), in connection with a
private placement transaction. The Notes bear interest at 9%
percent per annum, are payable in full together with accrued
interest on the earlier of (i) June 30, 1996, or (ii) on the date
ten days after the closing date of a debt or equity financing by
the Company resulting in gross proceeds to the Company of no less
than $1,000,000, or (iii) on the expiration date of rights issued
in connection with a rights offering by the Company as defined.
As additional consideration to the Noteholders, detachable
warrants to purchase fully paid and nonassessable voting Common
Shares of the Company at $1.00 per share, exercisable for a
period of five years from the date of the Notes were also
provided. For each $25,000 in Note principal warrants to
purchase 5,000 Common Shares were issued. In lieu of receiving
funds representing the principal amount of the Notes, holders may
elect to convert the Notes into the Company's Series A Preferred
Stock ("Series A Shares") at the rate of $.80 per Series A Share.
(E) Financing and Subsequent Events
Principally as a result of the restated financial statements for
the years ended December 31, 1992 and 1993, and the three
quarters ended September 30, 1994, the Company was in technical
default under the terms of the Revolving Credit and Security
Agreement with First Union National Bank (the "Line of Credit").
The financial covenants under the Line of Credit required
tangible net worth of not less than $2,355,000 on December 31,
1994, and require the ratio of total liabilities to tangible net
worth, as of any quarter end during the term of the loan, to be
no more than two to one. On January 10, 1995, the Bank provided
the Company a waiver of default to the specific conditions
existing on December 31, 1994. The Company is renegotiating the
financial covenants and certain other default provisions.
6
<PAGE>
On March 20, 1995, the Company and the Bank entered into a letter
agreement whereby the terms of payment under the Revolving Credit
and Security Agreement will be modified to reflect a maturity
date of April 30, 1996 in lieu of the current demand provision,
subject to: (1) the closing and funding of a $1,000,000 equity or
debt injection, subordinated to the Bank debt and on terms and
conditions acceptable to the Bank, of existing financial
covenants based upon Company-prepared projections of financial
condition deemed reasonable by the Bank and tested on a quarterly
basis.
On June 13, 1995 the Company was authorized by the Board of
Directors to issue 4,535,118 Shares of Series A Preferred Stock
$.01 par value ("Series A Shares"). The Series A Shares have the
following attributes:
(1) Rank. The Series A Preferred Stock shall, with respect
to dividend rights and voluntary or involuntary liquidation,
winding-up, dissolution, merger and combination, rank prior to
all classes of Common Stock.
(2) Dividends. The holders of record of any outstanding
shares of Series A Preferred Stock shall be entitled to
cumulative dividends at the rate per share of nine (9%) percent
per annum payable quarterly, on March 31, June 30, September 30
and December 31 of each year.
(3) Liquidation Rights. Upon the liquidation, dissolution
or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Series A Preferred Stock will be
entitled to receive and to be paid out of the assets of the
Corporation available for distribution a liquidation distribution
in cash in an amount equal to $.80 per share plus accrued and
unpaid dividends thereon to the date of such distribution.
(4) Conversion Rights. The holders of shares of Series A
Preferred Stock have the right at their option to convert such
shares into shares of Common Stock of the Corporation at any time
until the date five years from the date of issuance of such
shares of Series A Preferred Stock on a share for share basis.
If any shares of Series A Preferred
Stock are called for redemption, the conversion rights pertaining
thereto will terminate at the close of business on the business
day next preceding the redemption date. The Corporation shall
make no payment or adjustment on account of any dividends accrued
and unpaid on any shares of Series A Preferred Stock surrendered
for conversion. Holders who convert their shares of Series A
Preferred Stock after the record date for a dividend and before
the payment date for such dividend will be entitled to the
dividend as if they held their shares on the record date. No
fractional shares will be issued upon conversion and, in lieu of
any fractional share, an adjustment in cash will be made based on
the then current market price of the Common Stock.
(5) Redemption. The shares of the Series A Preferred Stock
are not subject to redemption on or prior to June 30, 1998 or if
any Series B Preferred Stock is outstanding. After June 30, 1998
the Series A Preferred Stock is redeemable in whole or in part, at any time
at the option of the Corporation, at the following redemption
prices: (i) if redeemed on or before June 30, 1999 - $.90 per share,
and (ii) $.80 per share thereafter, plus an amount in cash equal to
all accrued and unpaid dividends thereon to the date fixed for redemption.
If less than all of the outstanding shares of Series A
Preferred Stock are to be redeemed, the Corporation will redeem
such shares on a pro rata basis. There is no mandatory
redemption or sinking fund obligation with respect to the Series
A Preferred Stock.
(6) Voting Rights. The holders of shares of the Series A
Preferred Stock are not entitled to any voting rights except as
required by law or as described below. In the event quarterly
dividends are in arrears for two calendar quarters the holder of shares
of the Series A Preferred Stock shall have the same voting rights as if such
shares of Series A Preferred Stock had been converted into shares
of Common Stock.
(7) Status of Converted Stock. In case any shares of
Preferred Stock shall be converted pursuant hereto, the shares so
redeemed shall be cancelled.
7
<PAGE>
On July 31, 1995 the Company announced the closing of the Private
Placement Offering issuing $775,000 of Subordinated Convertible
Notes (See also Note D). Management expects all of the Notes to
be converted into an aggregate of 775,000 Series A Shares.
On September 28, 1995 the Company accepted a Letter of Intent from an
institutional investor for the proposed purchase of 2,812,500 shares of
Series B Preferred Stock of the Company for $2,250,000. Pursuant to the
Letter of Intent, the Company's Board authorized a new class of Nine
Percernt (9%) Cumulative Convertible Series B Preferred Stock ("Series
B Preferred Stock") to be placed with the institutional investor. The
Series B Preferred Stock has substantially the same terms as the Nine
Percent (9%) Cumulative Convertible Series A Preferred Stock ("Series A
Preferred Stock").
On October 20, 1995 the Company accepted a Loan Commitment from First
Union National Bank of Florida ("the Bank"). The loan commitment enables
the Company to refinance its current demand line of credit to a Term Note,
payable in equal monthly payments of accrued interest and principle due
using a 17 1/2 year amortization schedule upon a minimum principal payment
of $500,000 from the sale of $2,250,000 of Preferred Stock. The Term Note
would mature on March 30, 1998.
(F) Restatements:
During the fourth quarter of 1994, the Company recorded
adjustments to prior interim periods which expensed $273,297 of
previously capitalized software development costs and $68,525 of
underaccrued employee benefits. Both adjustments stem from
correction of errors originating in the first two quarters of
1994, the effects of which are summarized as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended
(Unaudited)
1994 March 31 June 30
<S> <C> <C>
Operating Income
(Loss) $(192) $(150)
Net Earnings
(Loss) (192) (150)
Net Earnings
(Loss Per Share) (.04) (.03)
</TABLE>
Operating results as restated where applicable, are
summarized as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended
(Unaudited)
1994 March 31 June 30 Sept 30 Dec 31
<S> <C> <C> <C> <C>
Total Operating
Revenues $ 2,254 $1,401 $1,676 $1,656
Operating Income
(Loss) (198) (674) (706) (1,981)
Net Earnings (Loss) (204) (691) (737) (2,676)
Net Earnings (Loss)
Per Share (.04) (.13) (.13) (.48)
Shareholders' Equity 3,298 2,652 3,133 502
</TABLE>
8
<PAGE>
Item 2. Management's discussion and analysis of financial
condition and results of operations.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Dynamic Healthcare Technologies, Inc. (the "Company") reported
revenues during the second quarter of 1995 of $2,267,000
representing the highest quarterly revenue in the last seven
quarters. Management continues the Company's strategic shift in
focus from the sale of computer equipment to software application
licenses, support, maintenance and other service revenues, where
higher margins are expected. As of June 30, 1995 the Company was
billing annualized recurring contract revenues for maintenance
and support services in excess of $4.1 million.
The Company also reported completion of its restructuring plan
adopted during the fourth quarter of 1994. The restructuring
consolidated resources in Florida, opened a national customer
support center and reduced the Company's labor costs through
elimination of duplicate job functions.
During the execution of the restructure plan, the Company has
continued to develop new products. The major development
activities in addition to the completion of various laboratory
product line commitments include, the continued development of
Monitrax, a new anesthesia information system which uses a pen-based
technology and document image solutions, an agreement with
IBM Corporation to provide support and enhancements for the IBM
Medical RecordsPlus/400 software product. Both Monitrax and
document imaging solutions are in their formative stages. They
will need continued management involvement and capital resources
to reach marketability and market penetration.
In connection with continuing to fund new product development
efforts, to provide additional working capital and to expand the
Company's opportunities for growth through acquisitions, among
other objectives, the Company began a Refinancing Plan (the
"Plan"), during the second quarter. On July 31, 1995 the Company
closed a Private Placement transaction as completion of Phase One
of the Plan. Through the issuance of Subordinated Convertible
Notes (the "Notes"), the Company raised $775,000 of funding.
Management expects all of the Notes to be converted into equity
in connection with a proposed Rights Offering, and has received
representations to that effect from the Noteholders.
Together with its new Dynamic name and the Refinancing Plan begun
during the second quarter, the Company continues with the same
focus. The Company will continue to implement its three point
plan to (1) streamline operations (2) reduce expenses, and (3)
increase revenues begun in the fourth quarter of 1994.
Results of Operations
During the quarter ended June 30, 1995 the Company recorded
revenues of $2,267,000 representing a 61% increase over revenues
of $1,401,000 reported for the same period a year ago. Support,
maintenance and other revenues increased by $1,236,000,
representing a 79% growth over similar revenues reported for the
same period in 1994. Application software license revenues
reported for the six months ended June 30, 1995 also increased by
more than 31% over those reported for the same period a year ago.
As evidence of the Company's strategic shift in focus from the
sale of computer equipment to software and services, revenues
from computer equipment for the six months ended June 30, 1995
decreased by over $502,000 as compared to those reported for the
same period in 1994. This decline that was more than offset by
the increase in support, maintenance and other revenues. As of
June 30, 1995, the Company was billing annualized recurring
contract revenues for maintenance and support services in excess
of $4.1 million.
9
<PAGE>
The margin on computer system equipment sales and support
improved to 17% during the quarter, up from 6% the previous
quarter. Management has improved focus on what hardware product
offerings the Company will market in connection with streamlining
operations. Despite this shift in revenue base, such revenues
increased by 7.5% during the second quarter of 1995 over similar
revenues for the prior quarter.
Client services expense is the Company's cost of installing,
maintaining, and providing training support for its software
products. It also, includes the cost of services for the
Company's professional and technical consulting engagements, and
the costs associated with the support of software products sub-licensed
and joint marketed by the Company. The increase of
35.9% to $640,694 in the second quarter 1995 as compared to 1994
in client services expense is primarily comprised of two factors.
First, Dynamic Technical Resources ("DTR"), was acquired in
August 1994, and the continuing client service costs have been included.
Second, and more significantly, staffing levels and
the resulting costs and operational inefficiencies that existed
in the Company's laboratory product line also contributed to this
increase. This product line was restructured and the re-engineered process
will align its operational processes, staffing
levels and other costs more directly to the product line revenue.
As a result, this cost will be reduced and the Company should
benefit with increased margins. Client services expense during
the second quarter declined by 11.5% or $83,495 relative to the
first quarter of 1995.
Software development costs decreased by approximately $40,000
during the second quarter of 1995 from the same costs of the
preceeding quarter. The Company continues capitalization of
Monitrax and the Company's imaging product.
Sales and marketing expense is the Company's cost of taking its
products and services to market and selling to its customers.
Sales and marketing expenses decreased by $37,000 during the
second quarter 1995 to $540,000 as compared to $577,000 for the
first quarter of 1995. Although higher fixed operating costs related to
penetrating new market segments exist as a result of
new software products and services, the Company has centralized
its selling efforts and created some efficiencies.
General and administrative expenses increased to $492,000 for the
second quarter 1995 relative to $456,000 for the first quarter of
1995 and $381,887 for the second quarter 1994. An increase in legal expenses
and in depreciation and amortization, as a result of the purchase
accounting treatment given the merger with DTR in August of 1994, are the
primary factors.
Interest expense and financing costs for the second quarter 1995
increased to $89,000 from $79,000 during the first quarter 1995
and $17,046 during the second quarter 1994. Borrowings under the
Line of Credit increased by $212,000 during the second quarter to
a level $2,057,000 higher than one year earlier. Additionally,
the Company's borrowing rate increased from 6.5% at December 31,
1994 to 10% at June 30, 1995.
During the second quarter 1995 the Company closed the Lincoln,
Nebraska office disposing of property with a book value of
$89,000 and recorded a loss on disposition of $62,000.
Additionally, the Company resolved outstanding customer issues
resulting in approximately $25,000 of other income.
Financial Condition, Liquidity and Capital Resources
As of June 30, 1995, the Company had cash of $236,000 and a
working capital deficiency of $3,652,000. This deficiency
includes deferred revenues of $1,035,000 and advance billings of
$246,000 in current liabilities as of June 30, 1995. These balances
represent cash received by the Company pursuant to contracts in advance of
revenue recognition upon contract performance. Additionally, $350,000 of
Subordinated Convertible Notes Payable included in current liabilities
are expected to be converted to equity.
10
<PAGE>
During the second quarter of 1995 the Company borrowed an
additional $212,000 under the Line of Credit and $350,000 of
Subordinated Convertible Notes principally to fund $218,000 of
software development, $108,000 of property and equipment
purchases and to provide necessary working capital. Although,
operations used $31,000 of funds during the six months ended June
30, 1995 this represents in excess of $1,194,000 improvement over
the same period one year ago. Deferred revenues as of June 30, 1995
decreased by $417,785 from the December 31, 1994 level and accounts
receivable decreased by $509,000 over the same period. Customers under
annual support agreements requested more frequent interim billing as
opposed to annual billing, and management responded by implementing a policy
recognizing a billable premium to accomodate these requests.
The Company began the second quarter 1995 actively seeking
"qualifying financing" to satisfy the conditions necessary to
obtain modification to the demand provision of the Bank Line of
Credit. Infusion of qualifying financing and meeting certain
other provisions would extend the demand line of credit to
reflect an April 30, 1996 maturity date. The Company was also
looking to cure a capital and surplus maintenance deficiency with
the NASD in order to preserve NASDAQ trading status. Although
the Company secured commitments to "qualifying financings", the
Company's Board of Directors began a Refinancing Plan (the
"Plan"), as an alternative to those proposed.
Subsequent to adoption of the Plan the NASDAQ Review Committee
denied the Company's request for temporary exemption and the
Company was delisted. The Company has appealed this decision
referencing the completion of the Private Placement Offering and
the current status of the Plan. The Plan, in addition
to obtaining an extended maturity on the bank financing and
restoring compliance with the NASDAQ's maintenance requirement,
provides additional working capital for expansion. Phase One of the Plan
was a Private Placement of Subordinated Convertible Debt issue. Phase One
was designed to infuse necessary working capital on an interim basis and
to demonstrate a commitment to the NASDAQ Review Committee. Phase Two
was designed to raise additional funding to grow the business upon terms
more favorable to existing shareholders than the proposed financings.
As of June 30, 1995 the Company issued $350,000 of Subordinated
Convertible Notes in connection with the Private Placement, and
subsequently on July 31, 1995, closed Phase One issuing $775,000
of Notes.
On September 21, 1995 the NRC informed the Company of its eligibility to
be relisted under the continuing maintenance requirements and upon timely
filing of the Company's Form 10-Q for the period ending September 30, 1995.
The NRC's decision, as cited in the Company's notification, was based on
the progress the Company's Refinancing Plan had made toward achieving
compliance with the NASDAQ's continuing capital and surplus maintenance
requirements.
On September 28, 1995 the Company accepted a Letter of Intent from an
institutional investor for the proposed purchase of 2,812,500 shares of
Series B Preferred Stock of the Company for $2,250,000. Pursuant to the
Letter of Intent, the Company's Board authorized a new class of Nine
Percent (9%) Cumulative Convertible Series B Preferred Stock ("Series
B Preferred Stock") to be placed with the institutional investor. The
Series B Preferred Stock has substantially the same terms as the Nine
Percent (9%) Cumulative Convertible Series A Preferred Stock ("Series A
Preferred Stock").
On October 20, 1995 the Company accepted a Loan Commitment from First
Union National Bank of Florida ("the Bank"). The loan commitment enables
the Company to refinance its current demand line of credit to a Term Note,
payable in equal monthly payments of accrued interest and principle due
using a 17 1/2 year amortization schedule upon a minimum principal payment
of $500,000 from the sale of $2,250,000 of Preferred Stock. The Term Note
would mature on March 30, 1998.
Future working capital requirements are dependent on the
Company's ability to restore and maintain profitable operations
and to obtain qualifying financing.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in existing or
pending legal proceedings involving the Company.
Item 2. Changes in Securities
The information required by this item is incorporated by
reference to Footnote E of the financial statements
included in Part I herein.
Item 3. Defaults Upon Senior Securities
The information required by this item is incorporated by
reference to Footnote E of the financial statements
included in Part I herein.
Item 4. Submission of Matters to a Vote of Securities Holders
The Company's Annual Meeting of Shareholders was held on
June 13, 1995, in Maitland, Florida. Five directors
were re-elected to the Company's Board. A listing of
those directors follows:
Name and Principal Occupation Number of Votes Received
Jerry L. Carson
Executive Vice President, CFO
Evans Enterprises 3,355,731
Kenneth C. Coon
President and CEO
Acceptance Insurance Companies,
Inc. 3,355,731
Mitchel J. Laskey
President and COO
Dynamic Healthcare Technologies,
Inc. 3,355,731
Thomas J. Martinson
President
Martinson & Company, Ltd. 3,355,731
David M. Pomerance
CEO
Dynamic Healthcare Technologies,
Inc. 3,355,731
12
<PAGE>
The Company's shareholders also approved changing the
Company's name from Terrano Corporation to Dynamic
Healthcare Technologies, Inc. by a vote of 3,352,881 to
18,982 with 2,727 votes abstaining.
A proposal to engage KPMG Peat Marwick, LLP, as the
Company's independent public accountants for the fiscal
year ending December 31, 1995 passed by a vote of
2,828,897 to 540,793 with 4,000 votes abstaining.
A proposal to amend the 1993 Incentive Stock Option Plan
to increase to a total of 600,000 shares issuable
pursuant to the terms set forth therein passed by a vote
of 2,727,072 to 609,002 with 38,516 votes abstaining.
A proposal to ratify and confirm the Board of Directors
issuance of stock options upon commencement of
employment of Messrs. Laskey and Pomerance passed by a
vote of 2,724,127 to 617,582 with 32,881 votes
abstaining.
A proposal to amend the existing Stock Option Plan for
directors and management employees (the "D & M Plan") to
conform the terms of exercise to 40% upon grant plus 20%
per year for each of three years thereafter and to
provide for early vesting upon death for all future
options granted under the D & M Plan passed by a vote of
2,708,027 to 637,935 with 28,628 votes abstaining.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11: Statement Regarding Computation of
Per Share Earnings.
(b) Reports on Form 8-K:
Item Reported Date of Report
Charles H. Altshuler, M.D.
Resignation From the Company's
Board of Directors 04/06/95
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
(Registrant)
Date November 14, 1995 /S/MITCHEL J. LASKEY
Mitchel J. Laskey
President, Chief Operating Officer
and Treasurer
Date November 14, 1995 /S/PAUL S. GLOVER
Paul S. Glover
Vice President of Finance, CFO
14
<PAGE>
FORM 10-QA
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
Index to Exhibits
Description of Exhibit Page Number
Exhibit 11: Statement regarding computation
of per share earnings 16
15
<PAGE>
<TABLE>
FORM 10-QA
DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
Exhibit 11
Computation of Weighted Average Number of Shares Outstanding
Per Share Earnings
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30
(Unaudited) (Unaudited)
1995 1994 1995 1994
Earnings (loss) available for common shareholders:
Net earnings
<S> <C> <C> <C> <C>
(loss) $(262,402) $(690,654) $(705,439) $(894,413)
Weighted average number of common shares outstanding and earnings
per share:
Primary:
Weighted average
number of common
shares
outstanding 6,582,883 5,304,524 6,294,977 5,298,231
Dilutive effect
of options and
warrants using
treasury stock
method -- -- -- --
Weighted average
number of common
and common
equivalent shares
outstanding 6,582,883 5,304,524 6,294,977 5,298,231
Earnings (loss)
per share -
primary $ (.04) $ (.13) $ (.11) $ (.17)
Fully diluted:
Weighted average
number of common
shares out-
standing 6,582,883 5,304,524 6,294,977 5,298,231
Dilutive effect
of options and
warrants using
treasury stock
method -- -- -- --
Weighted average
number of common
and common
equivalent shares
outstanding assuming
full dilution 6,582,883 5,304,524 6,294,977 5,298,231
Earnings (loss)
per share -
fully diluted $ (.04) $ (.13) $ (.11) $ (.17)
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> MAR-31-1995 JUN-30-1995
<CASH> 258,100 235,880
<SECURITIES> 0 0
<RECEIVABLES> 1,915,734 1,657,881
<ALLOWANCES> 220,280 121,924
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,858,039 2,617,634
<PP&E> 1,239,804 1,167,944
<DEPRECIATION> 2,038,018 1,915,050
<TOTAL-ASSETS> 7,015,971 6,763,708
<CURRENT-LIABILITIES> 6,247,080 6,269,353
<BONDS> 94,962 77,010
<COMMON> 65,828 65,891
0 0
0 0
<OTHER-SE> 608,101 351,454
<TOTAL-LIABILITY-AND-EQUITY> 7,015,971 6,763,708
<SALES> 354,409 742,442
<TOTAL-REVENUES> 2,267,300 4,501,490
<CGS> 293,131 658,939
<TOTAL-COSTS> 2,403,778 5,004,259
<OTHER-EXPENSES> 62,283 62,283
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 88,848 167,623
<INCOME-PRETAX> (262,402) (705,439)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (262,402) (705,439)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (262,402) (705,439)
<EPS-PRIMARY> (.04) (.11)
<EPS-DILUTED> (.04) (.11)
</TABLE>
